KEY FINANCIAL HIGHLIGHTS FOR Q3 2017
- All-time high fee and commission income for the quarter of RUB 5.46 bln, up 14.9% YoY. Share of fees and commissions in operating income increased to 57%, up from 44.0% a year ago.
- Interest income (excluding gain on financial assets available for sale) was up 1.4% QoQ but down 18.1% YoY mainly on the back of lower RUB interest rates in the broader economy.
- EBITDA margin was at 73.5%, as operating costs remained contained.
- Net profit amounted to RUB 5.14 bln, down 18.2% YoY and 3.0% QoQ on the back of lower interest income for the period.
KEY BUSINESS & CORPORATE HIGHLIGHTS FOR Q3 2017
- Maxim Lapin joined MOEX as the company’s new CFO. His arrival will further strengthen MOEX’s financial function and the management team as a whole.
- The Exchange established MOEX Innovations, a new wholly owned subsidiary company focused on innovative technologies and collaboration with fintech start-ups.
- MOEX hosted its first large scale retail event in Moscow, FINFAIR, to educate private investors about opportunities on the markets.
- MOEX paid a semi-annual dividend of RUB 2.49 per share (55.0% of H1 2017 net profit).
- Russian corporates were granted direct access to MOEX’s Money Market. Today a total of 29 non-financial companies can operate directly on MOEX’s FX and Money Markets.
- Weekly options on USD/RUB were introduced on the Derivatives Market, complementing the existing offering of maturities for USD/RUB options.
EVENTS OCCURRING AFTER THE REPORTING PERIOD
- Moscow Exchange held its annual Forum in New York. The event attracted more than 300 investors and financial market professionals looking for opportunities in the Russian capital markets.
- ACRA affirmed NCC’s credit rating at AAA (RU) with stable outlook. AAA is the highest rating on ACRA’s national scale. Earlier this year, Fitch upgraded NCC’s rating outlook to positive and affirmed its foreign currency rating at BBB-. NCC’s local currency rating is BBB, one notch higher than Russia’s sovereign rating.
- Forbes ranked MOEX among the world’s top 500 employers, alongside only three other Russian companies.
- MSCI, the global index provider, started using MOEX’s closing auction prices for Russian equities to calculate end-of-day values of its indices.
- Options on GBP/USD and USD/JPY FX futures contracts began trading on the Derivatives Market.
- The number of Individual Investments Accounts held by private investors reached 280,400 as of yesterday, up from 191,000 at the beginning of the year.
- In the second half of the year eight Russian companies held public offerings on Moscow Exchange, raising a total of RUB 89.4 bln (USD 1.5 bln).
Alexander Afanasiev, Chief Executive Officer of Moscow Exchange, said:
“In the third quarter Moscow Exchange posted record fee and commission income. Our efforts to develop the exchange infrastructure, simplify market access and diversify the product offering and client base have resulted in trading volume growth across a number of key instruments – equities, bonds, repos, FX swaps and commodity derivatives – while also growing income from depository and clearing services.
“Russian companies are increasingly using the public markets to fund their businesses, which is visible in the significant growth of new bond issues this year. In the second half of the year we are also seeing increased activity in the primary equity market. A new and important trend is mid-sized companies coming to the Exchange to raise capital: in recent weeks there have been two successful IPOs, one of which took place on our new SME sector.
“We have built out an effective risk management system: the recent volatility on financial markets has not impacted the reliability of the central counterparty.
“And finally, we see international investors ramping up activity on our markets, we are working on increasing liquidity on the Money and FX Markets by adding new market participants – notably Russian corporates – and we continue to actively work to attract retail investors.”
Maxim Lapin, Chief Financial Officer of Moscow Exchange, said:
“In the third quarter we achieved significant growth in fee and commission income thanks to successful implementation of our strategic initiatives as well as improving market conditions. We saw increases of fee income from the Money Market (+30.8% YoY), Fixed Income Market (+36.2% YoY), Equities Market (+19.8% YoY), Derivatives Market (+4.6% YoY) and Depository and Settlement Services (+21.1% YoY). The decline in net interest income was primarily attributable to lower interest rates on RUB balances. We continued to keep operating expenses under control as they grew 10.9% YoY, below our full-year guidance. Almost 50% of the increase was attributable to growth in D&A and equipment maintenance expenses, a result of last year’s CAPEX program. This helped us to deliver an EBITDA margin of 73.5%, attesting to the company’s high operational efficiency.”
|RUB mln||Q3 2017||Q3 2016||YoY||Q2 2017||QoQ|
|Fee and commission income||5,458.5||4,749.4||14.9%||5,076.9||7.5%|
|Net interest and other finance income||4,185.1||6,028.9||-30.6%||4,735.9||-11.6%|
|Other operating income||13.6||6.1||123.0%||7.9||72.2%|
|Basic earnings per share. RUB||2.29||2.80||-18.2%||2.35||-2.6%|
|EBITDA margin||73.5%||77.9%||-4.4 p.p.||74.7%||-1.2 p.p.|
ANALYSIS OF Q3 2017 FINANCIALS
Total operating income. Operating income in Q3 2017 was RUB 9.66 bln, down 10.5% YoY. Fee and commission income was up 14.9% YoY and reached RUB 5.46 bln, MOEX’s highest quarterly fee income to date. The share of fee and commission income in operating income rose to 57% (44% in Q3 2016). Net interest and other finance income, excluding a net gain on financial assets available for sale, decreased 18.1% YoY because of a decline in prevailing RUB interest rates. In 3Q 2017, the company recorded a net gain of RUB 16.0 mln on financial assets available for sale.
Fee and Commission Income
Securities (Equities & Fixed Income) Market. Fee and commission income from the Equities Market grew by 19.8% YoY to RUB 408.5 mln. Trading volumes in the Equities Market amounted to RUB 2.29 bln, up 14.1% YoY. As of 30 September 2017, total market capitalization of the Equities Market was
RUB 35.76 trln (USD 619.49 bln).
Fees and commissions from the Fixed Income Market grew by 36.2% YoY and reached RUB 494.8 mln. The growth in fees was supported by continued growth of new placements (up 51.0% YoY at RUB 1.27 trln, excluding overnight bonds), notably government bonds (up 78.8% YoY). Placements of corporate, municipal and other bonds, excluding overnight bonds, amounted to RUB 640.5 bln, an increase of 31.1% YoY. Overnight bonds contributed an additional RUB 2.90 trln to total placements. Secondary trading volumes in the Fixed Income Market were up by 24.6% YoY at RUB 2.98 trln.
Listing and other service fees from the Securities Market were slightly lower than in Q3 2016 at RUB 88.1 mln despite the strong trend of primary placements in the Fixed Income Market, owing to the higher share of large issues.
FX Market. Fee and commission income of the FX Market amounted to RUB 959.8 mln, 5.6% lower than in Q3 2016. Spot FX trading volumes were down 16.8% YoY. Trading volumes of FX swaps and forwards rose by 15.8% YoY, leading total volumes on the FX Market to rise by 6.0% YoY.
Money Market. Money Market fee and commission income grew by 30.8% YoY to RUB 1.56 bln. Trading volumes increased by 30.5% YoY to RUB 114.95 trln, driven by volumes of repo with the central counterparty, which rose by 25.4% YoY to RUB 60.02 trln, and repo with the Bank of Russia, which was up 2.2 times YoY to RUB 25.52 trln. Volumes of repo with general collateral certificates increased more than 14.2 times versus Q3 2016 and reached RUB 1.55 trln, making GCC repo by far the fastest growing segment of the repo market.
Derivatives Market. Fees and commissions from the Derivatives Market totaled RUB 494.5 mln, an increase of 4.6% YoY. Derivatives trading volumes amounted to RUB 21.66 trln, down 18.6% YoY on the back of lower trading in currency and index futures. Commodity futures trading volumes increased by 7.8% YoY, contributing 23.6% of total futures trading volumes. Options trading volumes increased by 26.5% YoY, supported by activity in index, FX and commodity options.
Depository and Settlement Services. The segment continues to be a steady performer, climbing to second place among business lines by revenue generated in Q3 2017. Fee and commission income from depository and settlement services increased by 21.1% YoY to RUB 1.08 bln. As of 30 September 2017, assets held in depo accounts at the National Settlement Depository (NSD) amounted to RUB 38.04 trln, up 13.4% YoY. Average assets on deposit in Q3 2017 were equal to RUB 37.27 trln.
Other fee and commission income. Sales of software and technical services contributed RUB 158.7 mln of fee income, down 1.4% YoY. Income from information services declined by 1.0% YoY and amounted to RUB 179.5 mln. Other fee and commission income grew by 30.1% to RUB 31.1 mln.
Net interest & other finance income. Net interest and other finance income before net gain or loss on financial assets available for sale was RUB 4.17 bln, down 18.1% YoY, reflecting lower RUB interest rates and a decline in client balances. In Q3 2017, the net gain on financial assets available for sale was RUB 16.0 mln compared to the significant sum of RUB 940.5 mln recorded in Q3 2016. Funds available for investment averaged RUB 696.48 bln in Q3 2017 (Q3 2016: RUB 779.31 bln).
Expenses. Operating expenses grew by 10.9% YoY to RUB 3.31 bln. Administrative and other operating expenses increased by 18.3% YoY to RUB 1.83 bln, with the majority of the increase driven by depreciation, amortization and maintenance of equipment and intangible assets (collectively up 19.2% YoY). Personnel expenses advanced by only 3.0% YoY, amounting to RUB 1.48 bln.
Cash and cash equivalents. Moscow Exchange’s cash position at the end of Q3 2017 totaled RUB 84.64 bln. The Exchange had no debt as of 30 September 2017.
Capital expenditures for Q3 2017 amounted to RUB 557.8 mln. Total capex for 9M 2017 was RUB 1,369.5 mln.
Moscow Exchange’s consolidated IFRS financial statements for Q3 2017 are available on the Investor Relations section of the company’s web site.
The Q3 2017 IFRS Financial Results webcast is scheduled for November 9th at 5pm (Moscow Time).